Hyatt to buy 24 hotels for $802M, enter 9 new markets

July 14, 2011|By Julie Wernau | Tribune reporter

In its largest acquisition in recent history, Chicago-based Hyatt Hotels Corp. announced Thursday that it will buy 24 hotels for $802 million in cash from LodgeWorks L.P. and its partners and will bring on members of the company's management team.

The acquisition will enable the company to introduce Hyatt-branded hotels to nine new markets, the company said, and establish an extended-stay presence in 16 new markets.

At the same time, Hyatt will gain a portfolio of young properties. LodgeWorks' AVIA hotels opened in 2009 and the average age of its Hotel Sierra properties is four years. At the end of March, Hyatt operated or franchised 232 full-service hotels consisting of 99,341 rooms, in 43 countries, and 196 select-service hotels with 25,111 rooms in the United States. The LodgeWorks deal would add 3,527 rooms to their portfolio -- 432 of which were Hyatt branded.

After the transaction, 16 Hotel Sierra hotels will be branded as Hyatt Summerfield Suites, increasing the number of hotels in that portfolio to 54 from 38. Five properties, including four boutique AVIA Hotels, will be converted to Hyatt hotels.

"Small boutique hotels ... it's not something they've done before. These are what you and I would call cool boutique hotels with all the bells and whistles that go along with them," said Mark Eble, regional vice president of PKF Consulting in Chicago.

The upper upscale hotels -- in Napa and long Beach, Calif.; Savannah, Ga.; and Woodlands, Texas -- take on the personality of their locations, said Cheryl Gilliam, a spokeswoman for LodgeWorks, which will retain a portfolio of 13 hotels after the deal.

"In Napa, there are these private cabana niches where you can drink wine. Long Beach has a rooftop pool and terrace," she said.

The Hotel Sierra properties are expected to fit in well with Hyatt's Summerfield Suites. Both are in the extended stay segment, which provide guests with full kitchens and other amenities and cater to business travelers. The segment is the most profitable in Hyatt's portfolio.

Still, among its competitors, Hyatt's extended-stay hotels lag in terms of sheer number of properties.

Eble called the transaction "a little expensive" but said there is a lot of added value to a transaction that adds hotels overnight rather than building them from scratch and anything to help Summerfield Suites gain brand recognition will be helpful

Standard & Poor's said Thursday that Hyatt's "BBB" credit rating and stable rating outlook would not be affected by the transaction because it has enough cash and lines of credit to fund the acquisition.

"We believe the acquisition is likely occurring at a good time in the lodging cycle and that it is a good fit with the company's existing portfolio," the credit rating agency said.

Hyatt will manage the hotels after the deal closes, expected in the third and fourth quarters.

In December 2004, Hyatt acquired AmeriSuites from affiliates of Blackstone Group, a New York-based private equity investment firm for $600 million. A year later, they acquired Summerfield Suites.

The president of Lodgeworks, B. Anthony Isaac, is expected to join Hyatt, as are other key members of the LodgeWorks management team.

jwernau@tribune.com | Twitter @littlewern

The hotels that will join the Hyatt Summerfield Suites portfolio (2,354 rooms) are in:

Bellevue, Wash.

Branchburg, N.J.

Charlotte, N.C.

Dulles/Sterling, Va.

Fishkill, N.Y.

Morrisville/Raleigh, N.C.

Parsippany, N.J.

Rancho Cordova, Calif.

Redmond, Wash.

Richmond, Va.

San Jose, Calif.

San Ramon, Calif.

Santa Clara, Calif.

Shelton, Conn.

King of Prussia, Pa.

Falls Church, Va.

The hotels that will become Hyatt hotels (741 rooms) are in:

Green Bay, Wis.

Long Beach, Calif.

Napa, Calif.

Savannah, Ga.

Woodlands, Texas

The hotels that are Hyatt-branded (432 rooms) that it will begin managing are: